Australian new home sales fall 3.5% in September

JamesGlynn

SYDNEY (MarketWatch) -- Australian new home sales fell 3.5% in September from August to their lowest level since December 2000, sending a powerful signal to the Reserve Bank of Australia that key parts of the economy are in need of an interest rate cut.

The board of the Reserve Bank of Australia meets later Tuesday amid speculation among economists it will cut interest rates for the first time since early 2009. Weakness in key parts of the economy such as housing are likely to underpin the decision to cut interest rates. The RBA's decision will be announced at 0330 GMT.

New homes sales in September were 14% below their level a year ago, the Housing Industry Association said.

"The September figures highlight the present soft conditions facing new home building and reinforce the importance that the RBA board calls it right today by cutting interest rates," HIA acting chief economist Andrew Harvey said in a statement.

"Monetary policy is arguably the most powerful economic tool in modern open economies but interest rate cuts still take time to boost the economy - so any further deferral of the decision to cut rates would be the wrong move," he said.

Detached house sales fell by 3.3% in the month of September 2011 to be down by 15.3% over the September quarter, while sales of multi-units fell by 5.5% in September, the HIA said.

The RBA has held its cash rate target at 4.75% since November last year. Most economists expect a 25 basis point cut to 4.50%.

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